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Exxon Mobil on Thursday morning reported the largest quarterly profit in American history, earning $15.9 billion in the second quarter. Excluding $7.5 billion from divestitures, however, EPS of $1.81 fell short of the $1.95.expected by analysts. Nonetheless, the stock is higher with the rest of the market, up 1.4%.

Chevron (CVX)

Fellow oil major, Chevron, reports on Friday and its shares were up 1.9% on Thursday. Chevron's charts show some interesting Elliott Wave patterns.

Back in the late 1930s, Ralph Nelson Elliott put forth a theory that all major trending moves unfold in five waves. Once the fifth wave is completed, we should look for a significant correction. Chevron looks like it is doing the fifth wave now, and I thought it will be useful to draw the attention of investors to this fact.

The first chart below shows that Wave 1, which started back in the 1980s, was corrected by a simple Wave 2. Elliott Wave Theory suggests that corrective waves tend to alternate in complexity. This seems to have happened with Chevron, because its Wave 4 turned out to be a complex correction. (Notice that minor wave b within the 4th wave went above the top of the 3rd wave). You will also observe that Wave 3 traveled a distance of 138.2% of Wave 1, a useful Fibonacci level that technical traders watch.

The second chart shows another aspect of alternation between waves 2 and 4. Whereas Wave 2 corrected Wave 1 by less than 50%, we notice that Wave 4 went as deep as 61.8% of Wave 3.

In my book "Five Waves to Financial Freedom," I explain techniques to arrive at potential targets for the end of the fifth wave. One measure is for Wave 5 to be equal to 100% of Wave 3. This is shown in the next chart below, and the level comes at $120.55.

A useful way to validate our analysis is to look at the minor waves comprising the fifth wave and see if we could apply the same techniques there. Unlike the three weekly charts shown above, the one below is a daily chart and zooms in from the end of the Wave 4. You can observe that the fifth wave has already completed four minor waves, and hence we are probably in the fifth wave within the bigger fifth wave. By measuring 61.8% of the distance from points 0 to 3 of these minor waves, we arrive at the target for the minor fifth wave, and it's at the $120 area again.

If the stock reaches $120, investors should be willing to lighten up on their holdings of Chevron. Whether we actually reach that target will depend on fundamentals of the company. Once the fifth wave is completed, h0wever, we are going to see a large correction back to around $88, and it is important for investors not to get caught long near the top, whenever that is posted.

If you are interested in knowing more about Elliott Waves, feel free to check out my other articles on Forbes. A majority of them have been fairly accurate. You will also find hundreds of examples at my other blog WaveTimes, covering a variety of asset classes.